This site is part of the Informa Connect Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 3099067.

IGM | Informa Global Markets
IGM on LinkedIn

CREDIT OPEN: Next batch line up ahead of US CPI & Fed

EU stocks are set to start FOMC day in the green with help from a positive Wall Street handover where tech gains led S&P500 to a new closing high and Nasdaq to a new all-time peak.

US index futures suggest those gains are holding but that positivity hasn't carried over into Asia though where attention fell on China inflation data where annual CPI remained stuck at a tepid 0.3% in May, below the 0.4% expected. PPI deflation eased to -1.4% from -2.5%, and was above the -1.5% expected, but still marked a 20th straight month of falling factory gate prices.

Also to note, mainland China stocks are extending losses ahead of today's expected tariff announcements by Brussels, prior to which an FT source story suggests that The European Commission is to announce additional duties of up to 25% on imported Chinese EVs from next month.

Turning to today and the initial data focus falls on UK monthly GDP where the MoM rate is expected at -0.1% in Apr (prev 0.4%) while the 3m/3m rate is seen edging up to 0.7% (prev 0.6%). Also out, industrial production is expected to decline by 0.1% MoM (prev 0.2%).

The Fed is widely expected to keep borrowing costs unchanged at 5.25%-5.50% for a seventh consecutive meeting. Thus, the focus will shift towards Fed Chair Powell's post-meeting presser as well as the updated dot plot for clues on the Fed's policy path ahead.

Ahead of the FOMC, US CPI for May is expected to show headline inflation cooling off a tad to +0.1% MoM (vs +0.3% prior). Meanwhile, the more important core CPI is expected to maintain the 0.3% MoM rate seen in April with the YoY rate easing to 3.5% from 3.6%.

With all that, rate markets remain firmly in the spotlight, especially given the considerable volatility seen in OATs on Tuesday while a 10yr bund auction will provide another opportunity to gauge the extent to which currently elevated yield levels are capable of stimulating demand.

For more on latest developments see the European Breakfast Briefing.

Wednesday's supply prospects

Another batch of issuers are lining up with deals for today s business despite the distraction of the US CPI print and FOMC later today. That after a fairly active session yesterday despite what was again a difficult backdrop, as some issuers took a rather pragmatic approach to ensure smooth execution. Standing out on the demand front yesterday was the UK's syndicated GBP11bn Jul 2034 gilt which saw a record orderbook, whilst another SSA heavyweight did the heaviest lifting in a EUR11.51bn euro day as the European Union priced a EUR6bn Oct 2039 line. See here for a full recap.

** IB Brandenburg EUR500m n/g 8yr

** PSP Capital EUR offering

** ITV EUR500m no grow 8yr

** K+S EUR500m no grow 5yr

** Burberry Group Plc GBP 6yr

** Webuild EUR400m 5yr

** Banca Popolare dell Alto Adige EUR300m n/g 7yr covered

** Ceskoslovenska obchodna banka EUR500m n/g 5yr covered

** Co-op Bank GBP 3yr SONIA FRN covered

After only three borrowers raised USD1.75bn in the US Monday, only one made it to market Tuesday. HPS Corporate Lending Fund raised USD400m via a 5yr note offering, that contracted only 15bp from IPT/PX and priced with no concession, bringing the two-day ex-SSA issuance total to USD2.15bn. For more colour see THE ENDGAME.

What to watch today - UK data, ECB speakers & FOMC

** Key Data: GE May F CPI (07:00), UK Apr Monthly GDP (07:00), UK Apr Industrial Production (07:00), UK Apr Trade Balance (07:00), US May CPI (13:30)

** Events / Speakers: ECB's Vujcic (09:40), Guindos (14:00), Nagel (20:00) & Villeroy (20:00), FOMC verdict (19:00) & presser (19:30)

** Auctions: UK to sell GBP900m 2045 linkers (10:00), GE to sell EUR4bn 2034 bunds (10:30)

To receive this analysis plus much more, subscribe to IGM. Request your free demo of the service today.